Correlation Between Fairfax Fin and Cenovus Energy
Can any of the company-specific risk be diversified away by investing in both Fairfax Fin and Cenovus Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fairfax Fin and Cenovus Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fairfax Fin Hld and Cenovus Energy, you can compare the effects of market volatilities on Fairfax Fin and Cenovus Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fairfax Fin with a short position of Cenovus Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Fin and Cenovus Energy.
Diversification Opportunities for Fairfax Fin and Cenovus Energy
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and Cenovus is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Fin Hld and Cenovus Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cenovus Energy and Fairfax Fin is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fairfax Fin Hld are associated (or correlated) with Cenovus Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cenovus Energy has no effect on the direction of Fairfax Fin i.e., Fairfax Fin and Cenovus Energy go up and down completely randomly.
Pair Corralation between Fairfax Fin and Cenovus Energy
Assuming the 90 days trading horizon Fairfax Fin Hld is expected to generate 0.49 times more return on investment than Cenovus Energy. However, Fairfax Fin Hld is 2.04 times less risky than Cenovus Energy. It trades about 0.19 of its potential returns per unit of risk. Cenovus Energy is currently generating about -0.02 per unit of risk. If you would invest 1,646 in Fairfax Fin Hld on August 25, 2024 and sell it today you would earn a total of 864.00 from holding Fairfax Fin Hld or generate 52.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Fin Hld vs. Cenovus Energy
Performance |
| Timeline |
| Fairfax Fin Hld |
| Cenovus Energy |
Fairfax Fin and Cenovus Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Fin and Cenovus Energy
The main advantage of trading using opposite Fairfax Fin and Cenovus Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Fin position performs unexpectedly, Cenovus Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Cenovus Energy will offset losses from the drop in Cenovus Energy's long position.| Fairfax Fin vs. Intact Financial | Fairfax Fin vs. Fairfax Financial Holdings | Fairfax Fin vs. Fairfax Financial Holdings | Fairfax Fin vs. Intact Financial Corp |
| Cenovus Energy vs. Canadian Natural Resources | Cenovus Energy vs. Suncor Energy | Cenovus Energy vs. MEG Energy Corp | Cenovus Energy vs. Baytex Energy Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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